Blockchain in the Cloud – Building Successful Blockchain Infrastructures (Part 2)

by Arthur · January 10, 2023

Disclaimer: The text below is a press release that is not part of Cryptonews.com editorial content.

This is part two of a three-part series on how blockchain and cloud technology could change the internet. We recommend reading part one, titled “Blockchain in the cloud – A greener future for blockchain developers.”

Table of Contents

Building successful blockchain infrastructures

There are countless creators in the IT universe currently building blockchain ecosystems, both in the front-end and back-end areas. Infrastructure strategy is fundamental to building a viable blockchain offering, and there are a number of key variables that will determine infrastructure success.

Understanding infrastructure variables will help keep costs and administration costs low, without compromising efficiency, flexibility or regulatory oversight. – Omar Abi Issa

Creators in the front-end area

Many innovators working in the front-end space are Software-as-a-Service providers and software houses. Many specialize in the creation of decentralized applications (Dapp) and exchanges (Dex), as well as decentralized finance (DeFi) applications used by large fintech and fin-operation companies, or even decentralized autonomous organizations (DAOs). Blockchain technology use cases have also increased in gaming, metaverse (VR/AR/XR), Internet of Things (IoT), art, NFTs and AI.

Creators in the back-end area

There are also many creators who are innovating in the back-end area. This includes mining pools – large clusters equipped with very powerful, efficient, multi-GPU-based dedicated servers.

Investing businesses are similar, but less resource-intensive. They operate nodes equipped with cryptocurrency assets that ensure the legitimacy of transactions. These businesses run blockchain validation on Proof of Stake (PoS) networks. See the first in this series of articles.

Companies such as Blockchain-as-a-Service (BaaS) providers also fall under this umbrella. Their expertise involves using ready-made connected services. They have clear solutions that are based on nodes equipped with a specific software stack that is interoperable with the P2P network. These solutions can also be based on automation nodes (APIs) that are ready to integrate with both front-end and back-end software layers.

Many blockchain companies provide the back-end network itself, whether it is a private blockchain solution, such as the Hyperledger fabric, or a public blockchain, such as the Ethereum network. Some networks offer inter-Blockchain communication (IBC) protocols, such as Cosmos.

There are companies that operate in both front-end and back-end areas. They typically have comprehensively designed private blockchain solutions, often in industries such as retail and logistics. These businesses are known as system integrators (SIs). They typically own the hardware in their data centers and build the front-end software layer, as well as customizing the back-end functionality. This is mostly offered as a service for businesses. However, discussing private solutions is limiting as they may be decentralized across several countries or continents. Solutions may also be limited to decentralization between a few nodes in a single data center, depending on the use case.

Infrastructure strategy variables

Building a sustainable blockchain database is one thing, but building one that is efficient, cost-effective and compliant is another. This process requires careful planning, and an understanding of how underlying infrastructure affects the success of your blockchain company.

OPEX vs. CAPEX

Increasingly, companies are choosing OPEX spending instead of the traditional CAPEX model. This is largely because CAPEX requires the company to invest large sums of capital in advance. The OPEX model allows for higher elasticity, especially in the start-up and scale-up phase, where companies are limited on budget. The OPEX pricing model offers transparent operating costs for infrastructure.

Cloud-based infrastructure products are not only available as monthly out-of-pocket costs, but they are highly scalable. Cloud helps contain administration costs and improve efficiency.

OPEX allows companies to reduce financial risk by removing the need to invest in infrastructure that does not meet the demand requirements of end users. The flexibility of cloud services unlocks the need for minimal users per profitable project, and provides the ability to set the margin per end user or consumer. This allows early stage blockchain adopters to maximize cost efficiency with only a small number of users. OPEX is key for businesses with high uncertainty or volatility from a demand perspective.

Regulatory requirements

GDPR and digital sovereignty are key concerns for European companies. Many believe that data should be stored locally in data centers within the EU region. Some business verticals ensure that additional infrastructure security layers are in place. Examples of these use cases include health technology companies, whose infrastructure is HIPAA or HDS certified. In addition to high-tech businesses that require PCI-DSS certified solutions.

It may only be a matter of time before there is increased regulatory oversight for specific blockchain use cases. Regulatory policies are likely to be directed at protecting end-user data or related to its location. Many companies, especially those with limited operating budgets, may struggle to comply with new regulations. Cloud service providers that offer appropriate regulatory safeguards will be able to offer practical, cutting-edge solutions and become the strategic partner of choice.

Building a successful strategy

With an ever-increasing number of businesses working in the blockchain industry, new, creative ways to operate blockchain services are beginning to emerge. The choices companies make during early development of the infrastructure layout can increase the chances of success.

The most popular infrastructure approach involves purchasing either semi-managed or fully managed cloud products with ready-made software layers and additional features to enhance network management. Integrated automation features, monitoring, as well as out-of-the-box backup solutions and functionalities can be added to ensure high availability, such as disaster recovery options. It is important for companies to consider infrastructure strategies, such as multi-product, multi-cloud or hybrid cloud. Getting these early decisions right will reduce infrastructure management, giving teams the flexibility to focus their energies and talents on R&D.

Bare-metal servers typically come with root access and cloud-integrated security layers, but they can be very demanding regarding the internal workforce required to build and maintain the proper infrastructure functionality.

Estimating inbound and outbound traffic for infrastructure when working with the major cloud service providers is a challenge, and this represents a real pain point for every company running blockchain infrastructure. Most cloud service providers charge additional fees which are then added to the cost of the infrastructure itself. This lack of predictability makes it almost impossible to estimate the operating costs of the infrastructure.

Summary

Many key variables must be considered before technical decision makers decide on their ideal infrastructure setup, these include:

Infrastructure strategy – the connectivity and interoperability of products and services
Financial Strategy – Including your decision on OPEX vs. CAPEX
Transparency – Your provider’s approach to data traffic charges and predictable billing
Compliance – Preparedness for future regulatory requirements

Importantly, blockchain developers should partner with a vendor that offers dedicated support.

A strong partnership with your supplier will ensure that the infrastructure supports your business ambitions, while easing administration costs and keeping costs optimised. – Omar Abi Issa

Explore the next blockchain article in the mini-series

To get the most out of your IT setup, at some point you may decide to use a multi-product, multi-cloud or hybrid-cloud approach. But how does Cloud complement blockchain strategies, and what should a blockchain developer look for in a cloud provider? Read our next article in this mini-series: ‘How to use the Cloud to solve blockchain challenges,‘ to find out more.